Research and development tax credits are a tax relief designed to encourage greater R&D spending and investment in innovation. They work by either reducing your company’s liability to corporation tax or giving you a cash payment.
There are two schemes for claiming relief: Small or Medium-sized Enterprise (SME) and Research and Development Expenditure Credits (RDEC). R&D will qualify under either scheme you attempt to overcome scientific or technological uncertainties at your own risk.
Easy R&D focus on the SME scheme where up to 33% of the qualifying R&D costs can be set against corporation tax. You can backdate claims two years after the end of your accounting period. Our service offers technical and specialist tax expertise to maximise R&D tax relief claims.
5 Easy Steps to claim R&D tax relief
Our 5 Easy Steps claim process combines meeting a Easy R&D Consultant with online convenience. We guide you through the information needed for your claim. You can provide this online in your own time and at your own pace.
A R&D Consultants will visit you to discuss qualifying criteria for your R&D tax relief – namely company, activity, project and costs.
Company
Your company will be counted as a HMRC SME if it has fewer than 500 staff. Additionally your firm’s turnover needs to be less than €100 million and have gross assets of less than €86 million. Fortuitously this is double the more widely used European Union SME standard definition.
Is your company is part of a group? If so, you’ll need to check the SME limits are not exceeded. HMRC treat all companies worldwide in a group as a single economic entity.
Activity
Your R&D will qualify if you try and overcome scientific or technological uncertainties, through creating new or significantly enhanced products, services, software or processes. You can also count R&D where you copy and improve a competitor’s product. However detailed information concerning your R&D cannot already be publicly available or deducible by a competent professional in the field.
Project
Make your project identifiable with a clear objective and a start and end date. If the project spans multiple accounting periods then qualifying costs in each period will be set against the corresponding corporation tax via a CT600. Your R&D project also needs to be at your own risk (you pay) and it doesn’t matter if the project succeeds or fails.
Costs
Your R&D costs are important to justify and maximise within your qualifying R&D project. They determine the size of your corporation tax relief. The key qualifying costs are summarised below:
- Staff Costs – Apportion your employee costs (salary, national insurance and employer pension) for their time spent on the R&D project. You can also count reimbursed R&D business expenses.
- Software – Include any software purchased for R&D purposes. Apportioned costs if there is any subsequent use.
- Subcontracted R&D – Claim 65% of what you paid your R&D subcontractor.
- Utilities & Consumables – Add up water, fuel, power and material used in the project.
- Prototypes – Include all R&D prototypes
How much can I claim?
Add up your eligible costs and if this is your first claim you’ll have the opportunity to cover the last 2 accounting periods. Your claim will be worth between 14.5% – 33% of these total R&D costs assuming all the criteria for R&D tax relief have been met. The Easy R&D average claim size is around £50,000 with over 600 claims and 100% success rate.